Author: srivaths

Stealing the actual card: This type of fraud involves stealing the victim’s card and using it for unauthorized purposes. Most people are unaware when their card gets stolen and crucial time is lost before the victim realizes that the card is stolen.
Skimming/Counterfeit fraud: This happens when the fraudster creates fake cards by obtaining the details of the magnetic strip or electronic chip from the victim’s card. It happens when we using our cards at POS locations. Extremely difficult to detect and people don’t realize it until they see their bank transactions.
Card not present(CNP): CNP fraud occurs when the fraudster obtains the victim’s card information and uses the card to make transactions which do not require the actual possession of the card, such as online or over the telephone.
Identity theft fraud: in this type of fraud, the fraudster uses the victim’s information to apply for loans and credit cards, withdraw money from the bank and generally use the card for privileges as a legitimate user.

People have been trying to steal money since the time money existed. Fintech is growing rapidly and providing users with opportunities to make financial transactions seamless. However, at the same time, it’s also providing fraudsters new ways of stealing money. The biggest threat I feel for fintech is going to be dealing with fraud. Robust security mechanisms have to be put in place in every step of a transaction, but at the same time, it should not hinder customer experience. After all, fintech is all about providing a seamless experience for customers. Finding the right balance between fraud prevention and customer experience will determine the success of fintech.

References :

http://www.cardwatch.org.uk/types-of-card-fraud.html

 

Off late Robo advising has been making all the right noises regarding financial advice. There seems to be a lot of potential and in future, the number of Robo advising companies are only expected to grow.

Going back a few years, customers had a couple of options when it came to financial investing. They had to do all the investment themselves or hire a financial advisor. Hiring a financial advisor had limitations, the biggest being having a minimum asset requirement which was around $0.5 million. These advisors charged around 2% of your investment which meant around $10,000 annually. Comparing this to Robo-advisors which typically have a min investment between $25,000 to $50,000 and charge around 0.5% management fees. At the surface level, Robo advising seems a much better option but can it replace human financial advisors?

Robo advising has the prospects of replacing financial advisors but in the end, I believe it comes down to individual preference. For many people wealth is personal and a lot of emotions are attached to it. They want to make future life decisions based on wealth and these people would not a want a robot advising them. At the same time, many people don’t have the time, grasp of finances and desire to consider all investment options and would prefer a robot to give financial advice. Another point to ponder upon is, after 2008 financial crisis the markets have been on the rise. A financial crisis is imminent in the future and when this happens would you want a robo advising you or would you prefer a human who you talk to and share your concerns?

References:

https://investorjunkie.com/35919/robo-advisors/

https://www.nerdwallet.com/blog/investing/best-robo-advisors/

Atom is UK’s first fully digital bank. In fact, Anthony Thomson who started the bank believes it is not a bank at all, and it is a data-driven company which has a banking license.

Banking in the UK was mostly dominated by banks such as HSBC, Barclays, RBS, and Lloyds. However, a number of startups are opening off late and Atom is one of them, which is completely online. Atom currently offers only savings account and with 2 percent interest, it is the highest in the market. All the banking features are expected to be launched this year. What is different about Atom and similar banks is that they are using data analytics to drive customers. Traditional banks give you the previous month’s statement whereas these so-called banks are using predictive analytics to give you the next months statement. Even, in the US there is a wave of such startups which are trying to disrupt the whole traditional banking system. The question that arises is what are the traditional banks going to do respond to such disruption? Or can we envision a future where we completely ditch our bank??

Banks, I feel are definitely responding by coming with their own apps but they are still lacking when it’s come to ease of use and the services they offer. The only option for such big banks is to acquire these startups, match them or slowly fade away. Depending on the action taken by these banks, the future of banking will be decided. I believe the day is not too far away when we decide to completely ditch our bank.

References:

https://wesh.uk/domain-name/why-2017-will-be-the-year-youll-finally-ditch-your-bank/

Organizations these days have a lot of data stored in the form of big data. One of the main problems organizations face is extracting knowledgeable information from such large amounts of data. Using the latest technologies such as machine learning, artificial intelligence and complex mathematical models they are able to glean information which can help to improve services, product quality and also efficiency.

Process mining is one of the approaches which allows organizations to make use of the data stored in their systems to identify trends, patterns, bottlenecks contained in event logs.

Uses cases for process mining
Discovery: in this use case it is possible to determine the structure of a process, the path taken by the process and determining what are the frequent and infrequent paths
Conformance Checking: In this use case, deviations from standard processes are detected. Anomalies or outliers can be determined by conformance checking
Enhancement: enhancement can be time perspective or organizational perspective. When time perspective, it is possible to determine cases which are the most time consuming, future problems which may make the process more time consuming and the time taken for completion of a process. When organizational perspective, it is mainly resource oriented which includes how resources are allocated and what processes require similar resources.

Conclusion: Process mining is going to be increasingly used by organizations in future because it opens up new ways of analyzing cases and event logs. With the advent of IoT, there is a definite need for mining IoT devices and process mining can help achieve it. Also, with machine learning and AI which can predict future performance, process mining tools are going to be widespread.

References:

http://wwwis.win.tue.nl/~wvdaalst/publications/p660.pdf

http://www.fit.vutbr.cz/study/courses/TJD/public/1415TJD-Rudnickaia.pdf

One of the main reasons for the 2008 financial crisis was due to banks giving a number of sub-prime loans. Sub-prime lending means giving loans to people who have difficulty in repaying and have a high probability of financial setback. In the current banking system, the banks are not risking their money. The risk is on the depositor and depositors have no information about the risky loans given by their respective banks. A solution to this problem is p2p lending.

P2P lending is a great way of mitigating these risky loans because it is completely up to the individual on how much to lend and assess the risk factor. The problem arises when there is a non-payment. By insuring the lender’s money, people have a new way of investing as well as borrowing money rather than relying on traditional banks.

P2P lending is a space where I feel fin-tech has the potential for huge growth. P2P is a great way of borrowing small loans as well as an additional source of income for lenders Currently, there are a few popular p2p lending services such as Lending club, Prosper, and upstart. In the coming years, I expect a number of p2p lending services with the possibility of having p2p lending apps which make p2p lending as seamless as a p2p transfer. The primary success factors are going to be ease of borrowing money, the interest rate for borrowers/lenders and the risk factor involved.

References :

http://www.forbes.com/sites/oliviergarret/2017/01/29/the-4-best-p2p-lending-platforms-for-investors-in-2017-detailed-analysis/#6c2cccd73856

Documentary called Inside Job —https://www.youtube.com/watch?v=bYm_oEO5iyE

The Fintech industry has grown rapidly in recent years due to a number of disruptive technologies such as digital payments, peer to peer lending, and wealth management. However, if there is one industry that has managed to stay away from the disruption in recent years is the Insurance industry. The Insurance industry is still old school, where most of the business is run on paper. Home insurance companies haven’t adapted to the Air BnB model nor have the car insurances companies revamped their model to suit ride-sharing companies such as Uber, Lyft, Scoop. The good news is that off late there has been a huge spike in funding for insurance technology, which rose from $740m in 2015 to $2.7 bn in 2016.

The U.S. insurance industry would be the ideal market to target since it is the largest in the world, with annual revenue crossing a trillion dollars. The US insurance industry also has hardly had any technological innovations making it a perfect industry for start-ups.

The start-ups could target different parts of insurance, such as the use of analytics to make better decisions, Blockchain technology. Fintech’s disruption of the insurance industry has already begun, kicked off by two successful startups, Oscar in the field of health insurance and Metromile which offers pay-per-mile car insurance.

The success of the startups is a good sign and it is high time this industry changes for the good. The insurance industry has been way too old fashioned and the process of claiming insurance is a painstaking process. I expect a number of startups targeting this space, and it hopefully the disruption will cause a change in how the whole insurance process works.

References:

http://www.investopedia.com/articles/insurance/121416/could-fintechs-insurance-innovations-disrupt-industry.asp

http://www.businessinsider.com/fintech-hot-insurance-insurtech-vc-economist-finance-disrupted-2017-2017-1

Insurance Is The Next Frontier For Fintech

PayPal 
PayPal has been highly successful with its Digital wallet and is currently a market leader. It is cloud-based and does not require an NFC-enabled smartphone.

Apple pay
Lets users make payments using their apple devices which have Near Field Communication (NFC) enabled. It uses NFC, Secure Card (SC), Host Card Emulation with tokenizations. It uses the best of both worlds to give a very high level of security to customer information.

Android pay
Android Pay is a mobile wallet that stores credit cards, debit cards, and loyalty cards. It works with all NFC-enabled Android devices. Android Pay has collaborated with American express, Discover, Master and Visa cards. Functioning of Android pay is similar to that of Apple pay, the only difference being Android Pay uses HCE.

Samsung Pay
Launched in September 2015 by acquiring a startup called Loop Pay. Loop Pay’s app manages and stores the card details on a mobile device and Loop Pay’s device processes the payment at the checkout. The biggest advantage of Samsung pay is that it allows payments that do not have NFC readers.

Conclusion
Apple’s main intent is to continue innovation and improve user experience with Apple products. For Samsung, it’s more about staying abreast with the competition and not missing out on future trends. For PayPal, it’s all about user transaction, ways to increase revenue and customer base. The biggest advantage for PayPal is that it is payment agnostic making it a clear winner in the war of digital wallets.

References:

http://www.gartner.com/document/2878822?ref=ddrec&refval=3162318

http://www.gartner.com/document/3093921?ref=solrAll&refval=164792540&qid=bd2476f24fb1a0a96ed4df41103a8715

http://www.cheatsheet.com/gear-style/apple-pay-android-pay-and-samsung-pay-what-you-need-to-know.html/?a=viewall

1) Bank-owned P2P model: In this model, the sender’s bank does the transfer of funds. There are a number of banks which operate in this way. The financial institutions have developed their own applications so provided P2P service.

Example :

clearXchange: It was founded in 2011, and it was owned by Bank of America, Capital One, JPMorgan Chase, US Bank, and Wells Fargo. Customers of either of the banks could send/receive payments. The sender only has to enter the recipient’s email or phone number. It was sold to Early Warning in 2016 and rebranded as Zelle.

2) Processor/partner P2P model: In this model, the sender’s bank uses a processor/partner to transfer the funds.

Example:

PopMoney was developed by Cashedge is now a part of Fiserv. Popmoney is slightly different from other P2P payment services in the sense that the transactions execute from sender to receiver directly, eliminating the need for a stored value account. Pop is an acronym for “pay other people” and provides services for several banks and credit unions.

3) Third-pparty-ownedP2P: In this model, the sender interacts with a third party to transfer the funds using ACH or credit/debit cards. This is the most popular model and there are a number of players in the market such as Google Wallet, Amazon, Dwolla, Venmo, and Square Cash. PayPal is the most widely used service. In 2015, PayPal processed $41 billion in mobile person-to-person payments, up 42% from 2014.

 

References:

http://marketintelligence.spglobal.com/our-thinking/ideas/big-banks-take-on-paypal-s-market-share-in-mobile-payments

http://www.paymentsjournal.com/WorkArea/DownloadAsset.aspx?id=22928

London, considered by many as the financial capital of the world is bound to be affected by Brexit. It remains to be seen if Brexit is going to be beneficial or detrimental for the UK Fintech industry. While reading about the effects of Brexit on Fintech I came across a lot of conflicting articles and experts have varied opinions. I personally feel Brexit is going to be detrimental for the UK because

• The loss of passporting which gives London-based business access to all the European Union nations to sell their services is going to be a big blow for the UK fin tech industry. This could result in a loss of 30,000 fintech jobs and 40 billion pounds in revenue.
• VC-backed Investment trend in the UK has been decreasing whereas in Europe the Fintech industry is booming.

 

• Limited market access might result in less foreign investment which in turn would prevent many fintech startups in the UK. Also, the existing startups would be tempted to move to other countries where it is easier to get funding.
•  The biggest problem is going to be the talent pool. The loss of passporting will result in an exodus of highly skilled talent in the UK.

http://www.techworld.com/news/e-commerce/uk-could-lose-30000-fintech-jobs-after-hard-brexit-3652882/

http://www.businessinsider.com/brexit-is-already-hurting-uk-fintech-2016-12

Articles for why Brexit will be beneficial for the UK fin-tech industry:

http://www.businessinsider.com/a-hard-brexit-might-actually-be-a-good-thing-for-fintech-2016-10

http://www.marketwatch.com/story/brexwhat-why-brexit-wont-necessarily-kill-londons-fintech-scene-2016-08-31

 

 

Cryptocurrency was never intended to be invented. The invention was a digital cash system which is completely decentralized, without a server or central authority similar to a Peer-to-Peer network for file sharing, which led to the emergence of cryptocurrency.

Cryptocurrency can be defined as limited entries in a database no one can change without fulfilling specific conditions. A cryptocurrency has a network of peers which records all transactions. A transaction is complete only when it gets confirmed by miners and it is permanent, forming a part of historical transactions called block chain.

Working of Cryptocurrency

Some of the popular cryptocurrencies are Bitcoin, Ether, Litecoin, Monero, Ripple. Bitcoin is the largest cryptocurrency and often regarded as the first cryptocurrency, even though prior systems existed.

Advantages of Cryptocurrency:

• No central authority, flexibility to make transactions all across the world.
• Almost impossible to manipulate transactions due to the additional layer of security called cryptography.
• All transactions have to be confirmed by miners, and once confirmed they are immutable.
• Personal information is hidden, thereby reducing the possibility of identity theft.
• Minimal processing fees.

Disadvantages

• If the holdings are not backed up, a computer crash can cause loss of cryptocurrency.
• There are constant fluctuations of cryptocurrency value.

 

http://blockgeeks.com/guides/what-is-cryptocurrency/

What Are Bitcoins – Pros & Cons, Investment Opportunities